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What does intertemporal production decisions mean?

Intertemporal Production Decisions is an important topic in microeconomics. Intertemporal Production Decisions relate to the comparison of present as well as future benefits and costs of an investment. It means how the present decisions of an individual regarding production can affect the type of options that would be available in the future. Due to the effect of learning curve, the productions today serve as an investment for the productions of tomorrow.

Experience and learning through present productions can prove to be highly cost-saving in future production. Average cost is reduced by learning economies over the long term. The cost benefits that are realized in this way can help give returns on learning investments made in the present production.

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Why Students Need Assistance with Intertemporal Production Decisions?

Intertemporal Production Decisions involve a comparison of benefits and costs of the present and the future, which are involved in an investment. Production with a resource capable of being depleted has a negative impact on the cost of production in future. However, rate of price rise tends to depend on the commodity market structure.

For example, petroleum production from crude oil tends to deplete crude oil deposits that cannot be replenished. Thus, only fewer quantity of oil is left for production in future. Production involving resources that can be depleted results in steady increase in product costs as production proceeds. Production decisions need to take all these factors into consideration while investing huge capitals in these productions.

Productive capital investments go much beyond the cash flows following the investment. Production decisions, other than capital investment decisions, also include a number of intertemporal considerations.

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